FINANCIAL MARKETS : Bond Rates End Mixed; Dow Surges 30.95
The bond market went on a wild ride Wednesday before closing mixed, while stocks rallied in heavy trading.
Short-term interest rates tumbled after the government reported a relatively modest rise in consumer prices in November, which some analysts said significantly lessens the odds that the Federal Reserve Board will tighten credit again when it meets next week.
The yield on one-year Treasury bills slid to 7.19% from 7.33% on Tuesday.
Meanwhile, yields also declined on intermediate-term bonds in the two-year to 10-year range, but they inched up on the longest-term issues: The 30-year Treasury bond yield closed at 7.86%, up from Tuesday’s 7.85%.
Some traders said the bond market was influenced not only by the Fed outlook and the inflation report, but also by continuing year-end portfolio shifts by institutional investors.
The five-year Treasury note yield, for example, sank to 7.76% from 7.82% on Tuesday after a sudden surge in demand for that issue early in the day. Traders said it appeared that a large investor was selling mortgage-backed securities, which have been particularly volatile this year, and buying five-year Treasuries.
In the stock market, buyers took control as short-term interest rates fell back. The Dow industrials jumped 30.95 points to 3,746.29, and stocks’ gains were broad-based: advancing issues outnumbered losers by about 2 to 1 on the New York Stock Exchange, where trading was heavy at 355 million shares.
Among broader indexes, the Standard & Poor’s 500 index jumped 4.82 points to 454.97, a 1.1% rise that beat the Dow’s 0.8% rise.
Some analysts are optimistic that the stock market will stage its traditional year-end rally if the Fed indeed decides against another rate hike.
Among Wednesday’s highlights:
* Financial stocks continued to rise, which analysts said suggests investors believe interest rates are peaking. Among banks, First Interstate rose 1 1/4 to 70, First Chicago gained 3/4 to 47 1/2, BancOne added 1/2 to 27 and Bank of Boston rose 1/2 to 27 5/8.
Other financial issues gaining included Federal National Mortgage, up 2 7/8 to 72 7/8; Chubb, up 2 5/8 to 74 7/8; and Charles Schwab, up 1 3/4 to 33 3/8.
* Among industrials, Union Carbide jumped 2 to 30 1/8, Caterpillar gained 1 1/8 to 52 3/8 and Scott Paper leaped 2 1/8 to 68 1/2.
* Many retail stocks advanced, including Nordstrom, up 2 1/2 to 47 3/4; Dayton Hudson, up 1 1/4 to 79 1/8; and Home Depot, up 1 1/8 to 46.
* In the tech sector, AT&T; shot up 1 3/4 to 51 after receiving a $1.2-billion contract from Flag Ltd. to build an undersea cable system. But computer networker Novell tumbled 1 3/8 to 15 7/8 after posting lower fourth-quarter earnings.
* Municipal bond insurer MBIA leaped 3 7/8 to 54 after saying it doesn’t expect any losses on bonds of government entities it has insured in Orange County. The insured bonds have been issued by municipalities that aren’t seriously threatened by the bankruptcy of the county’s investment fund, MBIA said.
Stocks ended mostly higher overseas. In London the FTSE 100 index surged 34.2 points to 2,980.6, while Frankfurt’s 30-share DAX index added 13.52 points to 2,024.77. In Tokyo, the 225-share Nikkei average gained 56.01 points to 18,931.49.
Mexico City’s Bolsa index closed down 6.44 points at 2,401.55.
In other markets, the dollar weakened slightly against other major currencies except the Japanese yen, as traders ignored more government data showing strong U.S. economic growth.
In New York, the dollar ended at 100.28 Japanese yen, up from 100.19 on Tuesday, but at 1.569 German marks, down from 1.579.
In commodities trading, coffee futures tumbled in a continued reaction to the U.S. Agriculture Department’s global supply forecast.
Green arabica coffee for December delivery finished 6.5 cents lower on New York’s Coffee, Sugar & Cocoa Exchange at $1.44 a pound, a six-month low.
Market Roundup, D5
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Interest Rates
30-year T-Bond: 7.86%
1-year T-Bill: 7.18%
